Inventory Autopilot

May 8, 2002

Few tasks are more arduous -- especially after a busy day -- than taking inventory. Fortunately, modern point-of-sale systems help streamline that duty plus provide operators more accurate information than the old scale-and-calculator combo.

"A POS system with an inventory program allows you to identify a store's problem areas, such as stock shrinkage or theft, over-topping pizzas and inaccurate supply orders," said Graham Granger, president of Digital Dining in Springfield, Va. "It also gives you tools to react to these things with reports, some that get down to where you can see every transaction that affected a certain inventory item."

A well-programmed POS system will track ideal product usage by comparing inventory on hand to recipe specs and product sales. Helping it do that means operators must perform some serious data entry, but once completed, only new items need to be added.

"Whenever you bring up a sale for, say, a large pepperoni pizza, the inventory program deducts certain amounts of pepperoni, dough, sauce and cheese," said Aaron Gilliland, vice president of St. Joseph, Missouri-based J-Soft International. Gilliland also serves as technology liaison between Kansas City, Mo.-based Breadeaux Pizza and POS manufacturer, Rockland Technology Group, in Dallas. "The one we're using now tracks the food cost of products to the T."

Should an operator's ideal food cost be different from his actual food cost, many POS systems provide detailed information, such as recorded waste. Others may point to incorrect portioning and warn an operator that his employees need additional training.

"It's telling me how much I have and how much I should have -- it gives you a very accurate read on how you're managing inventory," says Tony Tabangi, owner of Miro's Pizza and Deli in Cleveland, Ohio. Tabangi has utilized his POS system's inventory program for eight years.

Complexity Made Simple

POS and pizza go so well together because of the broad and varied nature of a pizzeria's inventory. And since the pizza business is unique from most other restaurants, the need for operators to shop carefully for POS systems is even greater.

"Performing an inventory thoroughly in a pizza restaurant is pretty complex, mainly due to the various recipes and spec differences," said Duessa Holscher, a partner with Portland, Ore.-based FireFly Technologies.

For example, on a two-topping pie, more of each topping is usually placed on a pizza with two toppings compared to a pizza with five toppings. Having a system designed to "understand" that, Holscher said, is important. "That's why a lot of pizza computer systems are designed specifically for the pizza market," she added.

Special Orders

Pizza-specific systems also simplify the order-taking/inventory depletion process through their ability to codify items in batches. For batch recipes, items are entered into the system by ingredient and by each ingredient's equivalent weight or count specs.

Consider spaghetti sauce: By inputting the amount of spice, tomato concentrate and meat for a five-gallon container, the system automatically calculates how much of each ingredient is used for each order as it's purchased.

"The first step is having the information, and that's what tracking inventory with a POS does for you. ... Pizza is run on pretty thin margins, so a couple of little mistakes can mean the difference between a profit and a loss."

Duessa HolscherFireFly Technologies

Even ordering supplies is made easier.

According to Robert Hamm, president of Seattle-based ABC POS, some systems will generate a suggested re-order report based on inventory on hand.

"For every inventory item, our program allows for what an item's minimum amount on hand should be," said Hamm. Currently, the company is working with some Domino's Pizza franchisees to enable their systems to produce a list of items necessary to have in stock relative to every projected $1,000 in sales.

Larger food distributors offer software that allows operators to send orders automatically from their POS systems. This is based on certain levels of inventory and what the operator decides to order. The software on the shop's POS system stores the order amounts, and the distributor's software retrieves the order at a designated time via phone line. E-mail ordering also is available.

Granger also points out that, when operators analyze reports, they're able to monitor purveyors' prices and check for variance over time.

"Then you can present the history to the purveyor and ask some questions," he said. "A lot of that slides between the cracks, and money is being lost."

Granger said a well-implemented inventory-tracking program can reduce food cost 3 to 6 percent, which is great news for any operator.

The Dirty Work

None of the inventory "magic" will happen, however, if an operator doesn't do the preparatory work. That includes entering data such as unit costs, weights and measures, menu prices, etc., plus conducting a physical inventory to calculate a baseline idea of goods on hand.

Holscher said operators who think all that can be done on a computer -- in the same amount of steps and in the same amount of time -- are mistaken.

"They still have to count a physical inventory and compare that with what the computer says they should have," she said. "If they find out that they're significantly off, that's when they need to research. The first step is having the information, and that's what tracking inventory with a POS does for you."

The ability to identify any inventory leaks helps operators avoid wondering at the end of the month why they're not making any money, Holscher added. A good POS can pinpiont whether they're not charging enough or whether there's a theft problem.

"Pizza is run on pretty thin margins," Holscher said. "So a couple of little mistakes can mean the difference between a profit and a loss."